This clause restricts one or both parties from disclosing information about the contract, the other party, or the business relationship to third parties without obtaining prior written approval. The clause essentially gives one party (often the stronger party) veto power over what the other party can say publicly or privately about the deal. This is a common protective mechanism used when parties want to maintain confidentiality around pricing, terms, strategic partnerships, or sensitive business information. However, the clause can be problematic because it may prevent a party from discussing the contract with their own advisors, employees, or legal counsel without jumping through approval hoops, and it can create ambiguity about what constitutes a "third party" (does this include your own accountant or lawyer?).
The practical impact depends heavily on how broadly the clause is written. A narrowly tailored version that only restricts public announcements or media disclosures is relatively benign. A broadly written version that requires approval before any disclosure to anyone—including your own team members or professional advisors—can severely hamper your ability to operate and get proper counsel. The clause also creates a potential leverage point where the other party can withhold approval strategically or use approval as a bargaining chip in future disputes.
If you must accept this clause, negotiate for specific carve-outs that allow disclosure to: (1) your employees and contractors with a need to know, (2) your professional advisors (lawyers, accountants, auditors), (3) your lenders or investors, and (4) government agencies if legally required. Define "third party" clearly to exclude these categories. Also push back on the requirement for "prior written approval"—propose instead that either party can disclose unless the other party objects within a specified timeframe (e.g., 10 business days), or that approval cannot be unreasonably withheld. If the other party insists on broad approval rights, ensure there's a time limit (e.g., they must respond within 5 days or approval is deemed granted) and a fallback mechanism for legally required disclosures.
Frequently Asked Questions
What does this clause mean in simple terms?
This clause restricts one or both parties from disclosing information about the contract, the other party, or the business relationship to third parties without obtaining prior written approval. The clause essentially gives one party (often the stronger party) veto power over what the other party can say publicly or privately about the deal.
Why should I care about this clause?
This is a common protective mechanism used when parties want to maintain confidentiality around pricing, terms, strategic partnerships, or sensitive business information. However, the clause can be problematic because it may prevent a party from discussing the contract with their own advisors, employees, or legal counsel without jumping through approval hoops, and it can create ambiguity about what constitutes a "third party" (does this include your own accountant or lawyer?).
What are my options?
The practical impact depends heavily on how broadly the clause is written. A narrowly tailored version that only restricts public announcements or media disclosures is relatively benign.
How does this affect small businesses?
A broadly written version that requires approval before any disclosure to anyone—including your own team members or professional advisors—can severely hamper your ability to operate and get proper counsel. The clause also creates a potential leverage point where the other party can withhold approval strategically or use approval as a bargaining chip in future disputes.